April 29, 2011

Attorney Stanley Chesley, the lead plaintiffs’ counsel in a securities class action against Fannie Mae, notified the Washington federal court judge overseeing the case today about disciplinary proceedings underway against him in Kentucky.

Chesley, of Cincinnati's Waite, Schneider, Bayless & Chesley, has been representing Ohio state pension plans in their class action lawsuit against Fannie Mae since 2005. Fannie Mae and its auditor, KPMG, were sued after the federal agency regulating Fannie Mae found that the mortgage giant had overstated profits and failed to comply with other generally accepted accounting principles.

But Chesley has also been facing legal woes in Kentucky since 2009, when the Kentucky Bar Association initiated hearings on whether Chesley had unlawfully received millions of dollars in legal fees from an unrelated class action.

On Feb. 22, a Kentucky trial commissioner
recommended (PDF) that Chesley be disbarred, writing that Chesley’s “callous subordination of the interests of his clients to his own greed is both shocking and reprehensible.”

The trial commissioner's report is not binding; a final decision will come following a hearing before the Board of Governors of the Kentucky Bar Association, which can then be reviewed by the Kentucky Supreme Court. If disbarred, Chesley could lose his license in the District and any other states that have a policy of reciprocal discipline.

Chesley filed a
notice (PDF) informing the court about the proceedings today. It was unclear from the notice why Chesley had decided to make the filing now; he could not immediately be reached for comment.

In early March, Ohio Attorney General Mike DeWine said in an interview with the National Law Journal that he was aware of the Kentucky proceedings but was not concerned that they would have any effect on the state’s case against Fannie Mae. He could not immediately be reached this afternoon.

A status conference is scheduled for Monday. U.S. District Court Judge Richard Leon is presiding over the case.

Attorneys with O’Melveny & Myers, which is representing Fannie Mae, declined to discuss the pending litigation. Attorneys representing KPMG and other individually-named defendants – including lawyers with Williams & Connolly, Zuckerman Spaeder, BuckleySandler and Gibson, Dunn & Crutcher – could not immediately be reached this afternoon.